ANALYSIS: ATMA-NIRBHAR BHARAT ABHIYAN

Introduction

On May 12, the government announced an economic stimulus package of Rs 20 lakh crore
and big-bang systemic reforms under the Atma Nirbhar Bharat Abhiyan (self-reliant India).
In his address to the nation, PM Modi observed that country should view the Covid-19 crisis
as an opportunity to achieve economic self-reliance. He stressed on the importance
of promoting “local” products. The intended objective of this plan is two-fold. First, interim
measures such as liquidity infusion and direct cash transfers for the poor will work as shock
absorbers for those in acute stress. The second is long-term reforms in growth-critical sectors
to make them globally competitive and attractive. Together, these steps may revive the
economic activity, impacted by Covid-19 pandemic and create new opportunities for growth
in sectors like agriculture, micro, small and medium enterprises (MSMEs), power, coal and
mining, defence and aviation etc. When Prime Minister Narendra Modi announced the five
pillars of this Self Reliant India, the core was non-economic and non-materialistic in
character. For the first time the approach to growth had truly turned towards internal strength
with the slogan, vocal for local to make it global, which should not be misconstrued as
protectionism. A logical corollary should be a demand-based economy system, which is self-
producing and self-consuming as was revealed over the course of the next five days by our
finance minister Nirmala Sitharaman.

Why Is It Introduced

With a nationwide lockdown for the better part of April and May, the total quantum of
economic activity in the country — measured by the monetary value of all goods and services
produced — has sharply curtailed. Post-Covid economic revival strategy of the government
gives a major thrust to agriculture and MSMEs. Since the first generation reforms, dwindling
prospects in agriculture have capped economic growth by containing the overall demand. The
government now wishes to create a unified market in agriculture commodities, pushing
investment in agriculture supply chain through the Agriculture Infrastructure Fund, better
price realisation for farmers and bringing modern technology in agriculture. If we look into
the objects of launching this mission we find the following aspects.

Income generation through agriculture and allied activities is expected to support the MSME
sector along with the preference for our local products and government procurement. The

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 thrust to mining notably in coal and other minerals, introduction of a seamless exploration-
mining- production regime, measures in civil aviation, privatisation of power distribution and
space will bring private interest in these sectors. Also, indigenisation of defence hardware
could open huge opportunities downstream for domestic manufacturing.

The economic disruption caused by the pandemic is of gigantic proportions. The loss to
economy could be at least one quarter of GDP growth, given that the economy has been in a
lockdown mode since the last two months. The dislocations of migrant labour and disruption
in domestic transport have adversely impacted agriculture, business units, suppliers and
exporters. It is uncertain as to how households will react to loss in income due to the
pandemic. There are predictions that discretionary consumption and consumption of durable
items will significantly slow this financial year. It is to rebuild this lost ground that the
revival package has been granular.

MSMEs will benefit from a range of measures which include easy access to loan and de-
risking the sector with a credit guarantee to help banks draw comfort. The emphasis on
technology driven systems in health and education, administrative reforms, and privatisation
of public sector units except in strategic sectors will bring the required efficiencies, thus
releasing resources over and above what has been allocated. Opening up of space and atomic
energy for private sector also entails positive spill over effect of technology.

Announcements in the financial sector cover a wide turf, addressing the concerns of all. As a
follow up, the government has already announced changes in the NBFC guarantee scheme,
like inclusion of CPs and bonds issued by NBFCs being considered eligible for this. Such
liquidity support to low rated NBFCs will help in damping volatility and build confidence.
Banks will draw a lot of comfort from changes announced in the bankruptcy code for
MSMEs and from the raising of thresholds to initiate insolvency.

Salient Features

The government announced a special economic package worth Rs 20 lakh crore or 10% of
India’s GDP in 2019-20 aimed towards achieving this mission. It includes the measures
earlier announced by the finance ministry and steps taken by the Reserve Bank of India.

According to the PM a self-reliant India should stand on 5 pillars –

1. Economy

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2. Infrastructure
3. 21st century technology driven arrangements and system
4. Demand
5. Vibrant Demography
The features are:
 As mentioned above, it is worth Rs 20 lakh crore or 10% of India’s GDP in 2019-20
— which is aimed towards achieving economic self-reliance.
 The package will focus on land, labour, liquidity and laws.
 It will cater to various sections including cottage industry, MSMEs, labourers, middle
class, and industries, among others.
 The package will also focus on empowering the poor, labourers, migrants, etc., both
from organized and unorganized sectors.

The first tranche of measures include Collateral free 4-year tenure loans for micro, small and
medium enterprises (MSMEs) with moratorium on payment for first 12 months This loans
would be worth three crore rupees. There is also a loan provision of 20,000 crore rupees for
stressed MSMEs. A special liquidity scheme of 30,000 crore rupees for investment in debt
papers of NBFCs was also announced, among other schemes.

The second tranche focussed on measures to help migrants and farmers.

The third tranche also included plans to invest 1.5 lakh crore rupees to build farm-gate
infrastructure and support the logistics requirements for fishermen, livestock farmers,
vegetable growers, beekeepers and related activities. The Central Government will deregulate
the sale of six types of agricultural produce, including cereals, edible oils, oilseeds, pulses,
onions and potatoes, by amending the Essential Commodities Act, 1955.

The fourth tranche mentioned a hike in foreign investment limit in defence manufacturing
and opened up space facilities while giving a new push to reforms in areas like commercial
coal mining, mineral block auction and privatisation of power distribution.

The fifth tranche announced a hike in the allocation to the MGNREGA scheme by 40,000
crore rupees. It also announced an increase in the borrowing limit for States by an additional
4.28 lakh crore rupees for the financial year 2021. The Central Government has said there
will be a maximum of four public sector units in strategic sectors, and state-owned firms in
other segments will eventually be privatised. Finance Minister Nirmala Sitharaman also

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announced the suspension of new bankruptcy filings on loan defaults for one year and raised
the threshold for insolvency under the Insolvency and Bankruptcy Code to 1 crore rupees
from the current 1 lakh rupees.

The package will help the sectors in the following ways.

 Primary Sector: The measures (reforms to amend ECA, APMC, Contract framing,

etc) announced for the agricultural and allied sectors are particularly transformative.
These reforms are steps towards the One Nation One Market objective and help
India become the food factory of the world. These would finally help in achieving
the goal of a self-sustainable rural economy. Also, the MGNREGA infusion of Rs
40,000 crore may help in alleviating the distress of migrants when they return to
their villages.
 Secondary Sector: Given the importance of MSMEs for Indian economy, the Rs 3
lakh crore collateral-free loan facilities for MSMEs under the package will help this
finance-starved sector and thereby provide a kick-start to the dismal state of the
economy. Also, as the MSME sector is the second largest employment generating
sector in India, this step will help to sustain the labour intensive industries and
thereby help in leveraging India’s comparative advantage. Additionally, limiting
imports of weapons and increasing the limit of foreign direct investment in defence
from 49% to 74% will give a much-needed boost to the production in the Ordnance
Factory Board, while reducing India’s huge defence import bill.
 Tertiary Sector: The government has adopted a balanced approach in addressing
concerns across sectors. For example: the details of the package were announced in
five tranches by Finance Minister Nirmala Sitharaman. It had 54 measures in total,
of which 24 are related to liquidity support and expenditure from the Central
exchequer while the balances 30 are policy reforms.

Legal Basis

The package of Rs 20 lakh crore comprises both fiscal and monetary measures, the latter
being in the nature of credit guarantees and liquidity infusions into banks and other financial
sector institutions rather than the economy per se. Majority of the package is liquidity
measures that are supposed to be transmitted by RBI to Banks and Banks to Citizens. This
transmission wouldn’t be as smooth owing to inefficient transmission of monetary policy.
The lockdown has lowered aggregate demand, and a fiscal stimulus is needed. The package,

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by relying overwhelmingly on credit infusion to boost the economy, has failed to recognise
that investment will pick up only when people across income segments have money to spend.
Unless the rest of the domestic economy is revived, the MSME sector may face a shortage of
demand, and its production may soon sputter to a close. Government claims that the stimulus
package is around 10% of India’s GDP. However, financing it would be difficult as the
government is worried about containing the fiscal deficit. The government also seeks a
disinvestment to mobilise the finances for the plan. But the majority of Indian industries are
already a bit debt-laden to take up the stake in PSUs.
Conclusion
In the magnificent recent book, Gandhi: The Years that Changed India, by Ramachandra
Guha, the author emphasized on how other patriots had used Swaraj to signify national
independence and how Gandhiji made India aware of its true or original meaning, Swa-Raj,
or self-rule. Our collective political Swaraj hasn’t always translated into individual economic
Swa-Raj because of inadequate formalisation, industrialisation, urbanisation, financialisation,
and skilling. The Atmanirbhar Bharat Abhiyaan policy announcements are important moves
in meeting Gandhiji’s vision of individual self-reliance and recognising poverty as the worst
form of violence. But Self-reliance is easier said than done. Modi promises to do it with a
focus on “land, labour, liquidity and laws” so as to benefit “labourers, farmers, honest tax
payers, MSMEs and cottage industry.” That sounds like the old-fashioned Gandhian plea
for people to wear home-spun cotton. It certainly won’t remake India’s economy for the
twenty-first century. When one goes through the Atmanirbhar Bharat package that came in
wake of the Covid-19 crisis, it comes to our mind that it is more like an old wine in a new
bottle. It is extended versions of Gandhi's Swadeshi movment, which was the soul of Swaraj
and Modi's previous Make in India policy. In this era of globalization and international trade
as fundamentals of any economy, every country is co-dependent on each other for a major
part of their income. So whether the package will bring a revolutionary growth in Indian
socio- economy post covid era or it will just end up as a gimmick, the question remains.